After a solid day for risk yesterday, surging higher on a continuation of the rumor that Japan’s economy will deteriorate so much the BOJ will have to print more money (even though overnight ex BOJ governor Sekido said Kuroda won’t print more) we have a more cautious tone this morning heading into the Easter long weekend. A double earnings miss from Google and IBM following the US market close, comments from the Chinese Premier suggesting that the government will keep its policy settings unchanged, and a press conference from Russia’s President Putin in which the Russian president as expected, has refused to back down, has put a small dampener on sentiment today. Add the fact that due to Good Friday April equities Op-Ex will take place today and trading in the next 9 hours promises to be more unrigged than ever, especially if the NY Fed trading desk manages to slam the VIX into single-digit territory.
Some detail: Stocks in Europe (Eurostoxx50 -0.5%) failed to benefit from a positive close on Wall Street, as a combination of less than impressive earnings on both sides of the pond, together with position squaring ahead of the long weekend weighed on sentiment. Asian equities traded relatively flat with a lack of newsflow to guide price action.
GBP/USD has printed its highest reading in 5 years as markets continue to hold a bullish view on the time frame for a BoE rate hike.
Going forward, the key event is the start of a two-day, four-party summit with the foreign ministers from the US, EU, Russia and Ukraine begins today in Geneva to discuss the ongoing situation in Ukraine, and will help determine the likelihood of further sanctions against Russia in the short term – this might determine how markets open early next week. In terms of data, most of the focus will be on US jobless claims and the Philly Fed outlook survey. Consensus is expecting a small increase to 10.0 (from 9.0 previous) in the latter. There are plenty of US corporates due to announce earnings before the NY opening bell, including Morgan Stanley, Goldman Sachs and General Electric. It’s a 4 day weekend in much of continental Europe and the UK but equity and bond markets in the US will reopen on Monday.
Bulletin summary headlines from Bloomberg and RanSquawk
- Treasuries little changed in pre- holiday trading, with 30Y yields lower by ~3bps on the week, 2Y and 10Y little changed, 3Y-7Y yield higher by 3.6bps-6bps amid Ukraine violence, China growth concern, Yellen comments that Fed will remain accommodative.
- Ukrainian forces killed three pro-Russian militants after an attack on a national guard base in the country’s east as the U.S. and its European allies sat down with Ukraine and Russia to discuss the crisis
- Putin rejected claims from Ukraine that he’d deployed troops there and said he would fight to defend compatriots in other countries
- China’s slump in property sales and construction is spurring speculation that the government’s four-year-old campaign of real-estate controls will start to crack
- China’s interest-rate swaps fell by the most since June after the government said it will lower reserve-requirement ratios at some rural banks
- Malcolm Young, a founding member and guitarist of Scottish- Australian rock band AC/DC, will take a break from playing due to ill health, while the group has pledged to keep making music
- Sovereign yields mostly higher; EU peripherals rally. Asian stocks mixed; Nikkei little changed while Shanghai -0.3%. European equity markets, U.S. stock futures decline. WTI crude and copper higher, gold lower
